The Securities Exchange Board of India (Sebi), in its recent report to the Joint Parliamentary Committee, has established that associated entities of the promoters of Ranbaxy Laboratories sold 32.65 lakh shares of the company through Ketan Parekh-associated entities.
These shares were sold during the period from January 1999 to October 1999 and in the price range of Rs 319 to Rs 1,229 per share.
Sebi's report observed that sale by the promoters' associates were one-to-one deals through trade-for-trade or rolling segment where the counter-parties were entities connected to Parekh such as Classic Credit, Panther Fincap etc. These trades were done in trade-to-trade, while the settlements of the trades were effected on the same day or the next day.
The sales by Parekh associated entities in the normal segment of the previous settlement were structured in such a way so that the pay-in day for such deals synchronised with the receipt shares from their trade-for-trade or rolling deals.
As per Sebi investigation, Classic Credit, an investment entity associated with the Parekh group, sold 2.90 lakh shares between August 16-20, 1999 at the Bombay Stock Exchange (BSE) through Chandravadan J Dalal, Milan Mahendra, Latin Manharlal Securities, Pravin V Shah Stock Broking, Triumph Securities and Hem Securities.
The Parekh group purchased 3 lakh shares from the promoter associates of the company through Indsec Securities on August 20, 1999 at the National Stock Exchange. These shares were delivered to Classic Credit on August 25 1999, that is, on the day immediate following the transaction.
These shares were then used to make the pay-in on August 25, 1999 to previously mentioned members of BSE. The promoter associates had a number of such synchronised deals.
In its explanation to Sebi, Ranbaxy promoters said Parvindar Singh had entered into an agreement with G K Ramamurthy and V Shankar, promoters of Crosslands Research Laboratories, for merger with an option to sell to Singh 15.43 shares of Ranbaxy at Rs 597.35.
Singh accepted the offer on March 23, 1999. These shares were purchased by Shimla Investments & Trading, Astral Investments & Trading and Divya Papers to keep the interest of the small investors.
These trading entities had borrowed Rs 90 crore from CountryWide Consumer Finance at a rate of 15.25 per cent per annum while repayment of Rs 92.58 crore, along with interest by these four entities was funded out of a medium term loan of Rs 120 crore by Shimla Investments from G E Capital on July 2, 1999 at an interest rate of 14.15 per cent.
Sebi investigations observe that after acquiring 15.43 lakh shares from the promoters of Crossland Laboratories at Rs 597.35 per shares, Ranbaxy promoters had increased the holding in the company. Subsequently, these shares acquired were sold in the market. The promoters also sold additional 11.82 shares during May to October 1999 at average price of Rs 750.
While, further Sebi investigation are on, the Reserve Bank has also started investigation into Shimla Investments and trading for instances of alleged dubious and fictitious dealings.
